As a small business owner, you know all too well that the world of entrepreneurship comes with a bucket load of risks. While it’s easy to troubleshoot challenges that pop up here and there, dealing with serious risks that threaten the existence of your business is a whole different ball game.
Think: pandemics, floods, fire, theft. There’s not much that can be done to prevent these, especially when they’re natural disasters. But what you can do is plan ahead so that if danger does come knocking at your door one day, you can sit back and relax, safe in the knowledge that you’re covered. That, my friends, is the beauty of insurance!
What is insurance?
Insurance is a form of risk management that protects against financial loss. The whole point of insurance in business is to put companies back into the same financial position they were in before experiencing unexpected financial loss.
Having business insurance is no longer a debatable choice in this day and age – it’s a must considering the increase in risks over the last couple of years.
So, how does it work? You pay a set premium regularly as per a policy underwritten by a broker, and if an unfortunate event does take place, you can claim from the insurance company you’re dealing with.
While insurance premiums may seem like an unnecessary cost to your business, think of them as a crucial safety net that will protect your business if the worst comes to worst.
What are the main types of insurance relevant to small businesses?
There are many types of insurance offered by companies nowadays, but for the purpose of this article, I’m only going to go through the types that are relevant to small businesses. You might want to invest in more specific types of insurance depending on the type of small business you own, but the following three are the most common types of small business insurance.
1. General liability insurance
General liability insurance (GLI) helps to protect your hard-earned business from several types of risks. For example, one of your employees becoming injured while working. Having GLI will mean that you can pay for the injury on duty claim without breaking the bank. This insurance policy also pays out if there is property damage. Life can be unpredictable and accidents happen so easily. Insuring your small business against general liabilities will help pull your business through in these times.
2. Commercial property insurance
Another staple insurance policy for small business owners is commercial property insurance. If you run your business out of a property that you own or rent, it needs to be functional for you to keep it going. This policy doesn’t only cover the building itself – any furniture or equipment will also be insured.
If an incident occurs and any area of your commercial property is damaged, this will help you replace or repair it and continue doing what you do best. Make sure that you clarify whether damage due to natural disasters is covered under your policy, as some policies don’t cover damage from events like floods.
3. Business interruption insurance
Lastly, you should consider business interruption insurance. The COVID-19 pandemic showed us all that businesses can face massive (and unexpected) challenges that could even see you shut up shop for weeks or months at a time. In these events, business interruption insurance will compensate for the loss of income and help you pay off other business-related debt.
Why should you have insurance for your small business?
In good times, paying for insurance might not seem necessary. It could look like an additional payment on top of the “more important” bills. But think of it this way: would you rather pay a smaller amount every month, or an enormous amount that could spell the end of your small business if something goes wrong?
Even a small problem can have big consequences. For example, loadshedding could cause a power surge when the electricity is turned back on. If you have computers or other equipment plugged in at the time, you might lose them completely. Any events that interrupt how you run your business can destroy what you worked so hard to build.
It’s a whole lot more feasible to pay a smaller amount, frequently as finding a large sum of money in an emergency is often out of the realm of possibility for many small business owners. The bottom line? Small businesses need insurance so that they can survive when things go south.
When you don’t have to worry about what could go wrong, you can focus on what could go right. You can turn your attention to growing your business or improving your products – which is why you started this to begin with, right? I hope that this article has given you some ideas for the next move to secure your business and get your business insured!
This content is for informational purposes only, you should not interpret any such information or other material as legal, tax, investment, financial, or other advice.